But it is another favoured target of foreign strategic investors: HSBC, Hang Seng Bank and Standard Chartered are all reported to be considering Huaxia. The Beijing-based bank’s chairman, Liu Haiyan, told reporters in March that the bank was beginning to discuss deals with foreign lenders.
Like Minsheng, Huaxia’s NPLs are relatively small at 3.67% of total lending at the end of June 2004. The bank’s net profit in the nine months ending September 2004 rose 19.7% from the same period a year earlier and its capital adequacy ratio was a robust 10.32% at the end of 2003, up from 8.5% earlier (it has not announced 2004 results).
Huaxia has 22 branches in 22 cities in China, giving it nationwide scope. Its single biggest weakness is that its largest shareholder is the Beijing-based steel maker Shougang Group, which owns
14.3%. Minsheng was Shougang’s in-house bank until it was made a shareholding bank in 1995, and its loan exposure to Shougang exceeded the government guideline of 10% at the end of 2003. “When the steel industry is growing like it is right now, that’s alright. But when the steel industry faces a slump, what will happen?” says an analyst at a Western investment bank.
Like other Chinese lenders, Huaxia has been struggling to ensure that its branches conform to risk controls set by its headquarters. According to Caijing, a respected Chinese financial magazine, Huaxia’s branch in the southern city of Guangzhou ran into trouble over its exposure to the high-risk corporate note business in 2003. NPLs at that branch hit a staggering Rmb1.1bn, with a bad loan ratio of 16.64%. Local managers were found to be circumventing lending restrictions by breaking big loans into multiple small loans. The bank says it has since remedied the situation.
Huaxia’s president, Wu Jian, previously held various posts at the Beijing branch of the Industrial and Commercial Bank of China, the biggest state-owned bank. He later became deputy manager of the Beijing branch of the Shanghai-based Bank of Communications, the fifth-largest bank in China. Mr Wu was vice-president of the Bank of Communications when he became Huaxia’s president in July 2001.
The former deputy mayor of Beijing, Liu Haiyan, became chairman of Huaxia Bank last June. Like Minsheng’s chairman Jing Shuping, Mr Liu is a member of the national committee of the CPPCC. He taught at Tsinghua University, Renmin University and the Beijing Oil University. He began his career at the Beijing Dong Fang Hong (East is Red) Refinery and later was general manager of Beijing Yanshang Petrochemical Co.
